Detroit Rethinks Small Trucks

After Ceding Market to Toyota, GM and Chrysler Plot Return

Rising fuel prices have General Motors and Chrysler taking a second look at peddling smaller pickup trucks. Jeff Bennett reports on the News Hub.

By

Christina Rogers and

Jeff Bennett

Updated March 11, 2013 8:05 p.m. ET

Rising fuel prices have General Motors Co.GM-1.25% and Chrysler Group LLC taking a second look at peddling smaller pickup trucks—vehicles that the Detroit Three auto makers abandoned in the U.S. amid weak demand.

GM is planning to revive its Chevy Colorado and GMC Canyon in late 2014, and Chrysler is considering a replacement for its Dakota. Both see the vehicles helping them to hit higher fuel-economy targets and to regain market share from Toyota Motor Corp.'sTM0.90% Tacoma, the current top-selling small hauler.

ENLARGE

General Motors, which has focused on full-sized pickups like the Chevy Silverados shown above, plans to revive some mid-sized models.
Bloomberg News

"We believe there will be a growing number of pickup truck buyers in the future that will want fuel economy," GM North America president Mark Reuss said."With our new trucks, we will be saying: Here is something really fuel efficient."

A return represents a risk for Detroit's auto makers, which haven't been successful in convincing buyers to downsize to smaller trucks, and which carry smaller profits.

GM halted production of the Canyon and Colorado last August and had no upgrades ready due to its 2009 bankruptcy filing. Chrysler quit making the Dakota in 2011 after years of unimpressive sales. Ford Motor Co.F-1.79% dropped its Ranger pickup in the U.S. in 2011 and hasn't looked back.

Barclays Capital estimates auto companies earn between $7,000 and $10,000 on each full-size pickup because they command higher prices in dealer showrooms, while midsize trucks bring closer to $3,000 to $4,000 a vehicle.

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"The market is small. It is very small. So you have to be careful when you explore the opportunity to get back into it," said Fred Diaz, chief executive for Chrysler's Ram truck brand. "One thing we do know, we want a vehicle that has high miles per gallon to help us with our [corporate average fuel] economy needs."

In addition to better fuel economy, the auto makers hope to attract price-sensitive younger buyers away from rivals and build brand loyalty. About 264,000 midsize pickups were sold in the U.S. in 2012, compared with 1.6 million large trucks, according to researcher AutoData Corp. Toyota now accounts for about half the market and Nissan Motor Co.'s Frontier holds an about 21% share.

Bob Carter, Toyota's senior vice president for automotive operations, said he anticipates anticipated demand for small pickups to grow, but how fast will depend on the direction of gas prices and other auto makers also getting into the market. Industry sales of midsize trucks could reach between 300,000 and 350,000 units in the next two years, Mr. Carter said.

Already, in passenger cars and sport-utility vehicles, buyers are downsizing to smaller vehicles, not only for the better fuel economy, but because auto makers are offering them with more options and features. "Logic says it could happen in pickups," Mr. Carter said.

GM's Mr. Reuss also sees fuel prices playing a factor in a sales shift to smaller vehicles. Development of the new Canyon and the Colorado is already under way.

They won't haul or tow as much cargo as the bigger Chevrolet Silverado and GMC Sierra but will offer four-cylinder engines, better fuel economy and should cost less. The company hasn't set a price range.

Meantime, Chrysler is still deliberating returning to the midsize pickup business. The company, majority owned by Italy's Fiat SpA, had considered a successor to the Dakota as part of its 2009 business plan, but has yet to authorize development.

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If it did, the truck would have to appeal to buyers globally to have enough scale to make the business case work, Mr. Diaz said. It would have to be engineered to sell in places like Asia and South America, where more economical trucks tend to be in strong demand.

Pricing is a big part of the challenge. "That was the problem with the Dakota," Mr. Diaz said.

Over the years, the truck grew larger and its price rose, eventually bumping up against the entry level price of a full-size truck, confusing customers, Mr. Diaz added.

Truck buyers, like Matt Redlinger, will needs some convincing. Mr. Redlinger, owner of Grounds Keepers Inc., a landscaping company in Houston, Texas, frequently buys pickups for the company fleet.

While smaller trucks might be fine for his sales employees who do a lot of driving and don't carry a lot, he is sticking with a full-size pickup.

"I pull a trailer every now and then," said Mr. Redlinger, who stands 6 feet 2 inches tall. "I'm a pretty good size guy, too. I can't get into a smaller truck."

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